DS0801 -

Emergence, Conditions and Management of Purpose-Driven Companies – PURPOSE

Emergence, Management and Sustainability of Purpose-Driven Companies

The purpose-driven corporation as an original model of responsible corporate governance is being widely adopted at the international level and this development leads to a profusion of various forms. This project aims to conduct an effort to conceptualize and develop the commitment models, assessment tools and monitoring mechanisms adapted to the case of innovative missions, using an empirical approach, both in the United States and in France.

Issues raised and objectives of the project: do purpose-driven companies meet the promises of responsible governance?

Since 2010, several countries have adopted new legal forms of company aimed at creating a commitment by companies and their shareholders to social and environmental objectives, in response to the limits of standard CSR practices to meet contemporary economic, social and environmental challenges. These purpose-driven companies demonstrate an interesting potential to promote innovation capabilities within companies, but due to the recent nature of these structures, little work has been done to empirically examine their innovative management model. This project aims to study this emerging movement, in order to characterize the conditions of sustainability of mission companies, to empirically assess their innovation potential, and to develop methods and instruments to manage them effectively. <br /> <br />This model raises important questions: if disruptive innovation represents a promising way to meet current challenges, how can a company «commit to innovate« and evaluate or monitor the progress of a project whose impacts are still unknown, and the knowledge to be created? <br /> <br />The research project is structured into three steps: <br />1) conduct an in-depth empirical analysis of the “purpose-driven companies” that exist today, collecting both quantitative and qualitative data; <br />2) conduct advanced modeling of the innovative purposes, in order to study the conditions for a commitment to specific, and even innovative, objectives; <br />3) derive recommendations for the design of governance rules, as well as management and control principles to guide purpose-driven companies. In addition to the economic impacts, the project also aims to structure a scientific community dedicated to these issues at the global level, allowing exchanges between multidisciplinary research teams that currently work separately.

The project is structured in three main stages:
1- Building an integrative framework for the abundant literature on related topics (hybrid organizations, impact investment, social enterprises, responsible governance...). This framework aims to isolate the issues specific to companies with innovative missions and to allow entrepreneurs to situate themselves in the general landscape.

2- Empirical studies and modelling:
- Empirical studies in the US where the statutes are already more established (2012): analysis of the challenges of innovative social purpose corporations in the states of Washington and California (interview campaign) and quantitative approach on the new statutes.
- Qualitative and comparative studies on cases of purpose-driven corporations in France: modelling of the purpose, of the exploration and design reasoning carried out, and of the role of the monitoring authorities (including the investment impact fund, a partner in the project)
- Longitudinal study of a company that has adapted its governance and evaluation methods since 2015: performance and limits of the tools implemented.

3- Experimentation workshops and sharing of good practices:
The project has enabled the creation of a community of purpose-driven companies within which working groups and workshops allow the confirmation of hypotheses and the experimentation of models resulting from the 2-.
These workshops aim to produce available materials for entrepreneurs and managers, as well as legislators.

The work carried out within the framework of the PURPOSE project has made it possible to structure three main lines of results:

1. The creation of a structured analytical framework for the purpose-driven company that makes it possible to compare the different legal models (benchmark) and help entrepreneurs and managers to find their way in diversity, but also to structure the areas of validity of the results of the literature (accountability, managerial latitude, etc.) as well as the new research questions raised by innovative missions.

2. Purpose modeling as the heart of governance allowing «prospective« control or control on the «unknown«: the challenge of the company with an innovative mission is to allow control on the part of new exploratory paths opened to meet the proposed purpose. Where traditional impact measurement methods focus on the best choice of indicators among known criteria, an innovative mission requires regular monitoring to ensure that new knowledge has been acquired and new conceptual paths opened. The project thus reveals the need to think jointly about the formulation of the purpose and the constitution of the control tools with certain hypotheses to be validated on the necessary content of the mission: commitments to preserve the «known«, «foresight« with regard to future risks, and exploration of a still partially «unknown« desirable future.

3. Implications for purpose engineering: when exploration raises questions about the basis of criteria on which external engagement is based, ensuring the legitimacy or «integrity« of the new evaluation criteria requires the systematic use of competent control bodies backed by tools for controlling exploration, the main objective of which is to validate the transformation of criteria and mission interpretation over time.

The project provides a solid scientific basis for the deployment in France and abroad of original governance models, particularly around the «raison d'être« and the purpose.
The support provided by the ANR to the creation of a community of companies with a mission and dissemination and outreach events has also made it possible to provide expertise and a set of experiences to support the development of the PACTE law (article 61).
From a scientific point of view, the project opens up the exploration of original forms of shareholding and investment backed by the purpose: investors with a purpose, but also ecosystems with a purpose with the involvement of actors at the sectoral level for example.
Finally, the project makes it possible to structure a first scientific community around purpose-driven company as a research object, with a development to follow in the interest of publications and academic events.

Organization of scientific conferences:

- 1st international workshop on Purpose-Driven Companies, Nov. 2017, MINES ParisTech. This seminar brought together the research of ten institutions from six European and American countries on the subject, and has confirmed the potential of an academic community on this rising research topic, and whose interest is growing in generalist journals in management sciences.

- Leixnering S., K. Levillain, B. Segrestin, J. Veldman : Professional Development Workshop «The Fall and Rise of the Corporation«, Academy of Management 2019, Boston.

Book chapters:

Kevin Levillain, Simon C Parker, Rory Ridley-Duff, Blanche Segrestin, Jeroen Veldman, et al.. Protecting Long-Term Commitment: Legal and Organizational Means. Ciaran Driver & Grahame Thompson. Corporate Governance in Contention, Oxford University Press, 2018, 9780198805274.

Kevin Levillain, Blanche Segrestin, Armand Hatchuel. Profit- with-Purpose Corporations An Innovation in Corporate Law to Meet Contemporary Corporate Social Responsibility Challenges. A. McWilliams, D. Rupp, D. Siegel, G. Stahl & D. Waldman. Oxford Handbook of Corporate Social Responsibility: Psychological and Organizational Perspectives, Oxford University Press, inPress.

Conference papers:

Jérémy Lévêque, Kevin Levillain, Blanche Segrestin. Réalisation de l'impact ou génération d’alternatives ? Une étude des méthodes d'évaluation de l'investissement à impact.. RIODD 2018 - Pour durer ou pour changer, Oct 2018, Grenoble, France.

Jérémy Lévêque, Kevin Levillain, Blanche Segrestin. Is a Shift Always a Drift? Governing Hybrid Organizations with Innovative Purpose. EURAM 2019 - Exploring the Future of Management: Facts, Fashion and Fado, Jun 2019, Lisbonne, Portugal.

Kevin Levillain, Blanche Segrestin. From Primacy to Commitment: Revising corporate governance theories to account for recent legal innovations in the US. EURAM, Jun 2018, Reykjavik, Iceland.

This research project will study the emerging movement of purpose-driven companies, with the intent to characterize the conditions of its sustainable development and the methods and instruments of its effective management. Despite a profusion of private and public initiatives to take the ever-growing economic, social and environmental impact of today’s firms activities into account, recent researches highlight the limits of current approaches and show that their result is relatively insignificant when compared to the social and environmental stakes that we face nowadays. However, a growing number of organizations and legal changes in several countries are shaping a new way forward: the emergence of “purpose-driven companies”, a model of companies that creates a commitment of shareholders and directors towards an explicit not-for-profit purpose within usual for-profit structures. Due to its relative youth, this new model has not yet been thoroughly studied. It could yet have strong impacts, both theoretically and practically, on the way corporations can contribute to society. In particular, if companies can commit themselves to develop disruptive capabilities (e.g. to develop new alternatives to fight income inequalities, or to ensure energy transition, etc.), the purpose-driven model could be all the more powerful. Yet, it remains to be examined whether and how these new options for corporate commitment can be and are indeed implemented, as well as what are their actual effects. Innovative purposes raise especially new questions as they call for new accounting or assessment principles: for instance, how to assess whether a company is effectively developing new knowledge for accompanying the energy transition?

The aim of the project is therefore to develop a comprehensive understanding of the potential and conditions of existence of purpose-driven companies, in order to support their development, evaluate and improve their impact and ensure their sustainability. Our goal is to advance both theory and empirical understanding of the potential of purpose-driven companies in order to contribute to the design of new methods and tools to help companies targeting a particular – sometimes innovative – purpose, to transition to this form, and enhance their sustainability in the long run. Our research setting therefore relies on three steps:
1) to lead a systematic and in-depth empirical analysis on existing purpose-driven companies by simultaneously gathering qualitative and quantitative data;
2) to contribute to an advanced modelling of the purpose in these companies, that could inform on the possibility of commitment towards specific purposes, especially innovative ones;
3) to derive recommendations both for the design of governance systems and for the management and control of purpose-driven corporations.

The societal and managerial impacts this project is expected to provide include: 1- a clarification of the potentials, limits, and risks implied for firms willing to engage in a transition to a purpose-driven form; 2- the creation of elements of methods and tools to support purpose-driven companies, for example in the definition or management of their purposes; 3- a collection of data for public that are lacking feedback on their recent legal changes, and rigorous analysis of the potential of such change for those considering it. As for academic impact, beyond advancing and publishing theory on purpose-driven companies, this will contribute to structure a global scientific community dedicated to these questions, for example through the organization of international exchanges and conferences between existing research teams that are currently working separately.

Project coordinator

Monsieur Kevin Levillain (ARMINES)

The author of this summary is the project coordinator, who is responsible for the content of this summary. The ANR declines any responsibility as for its contents.

Partner

ARMINES
CITIZEN CAPITAL PARTENAIRES
FCBE Fogelman College of Business and Economics - University of Memphis

Help of the ANR 204,597 euros
Beginning and duration of the scientific project: September 2016 - 24 Months

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